Brexit and wider political tensions including the US-China trade war contributed to an 11 per cent drop in pre-tax profits at estate agency Knight Frank in the year to March.
The UK-based partnership, which handles residential and commercial properties globally, said profit fell to £148.4m, while group turnover shrank 2 per cent to £517.4m from the previous year, which had been a record year for profits and revenues.
Staff costs also rose 1.4 per cent to £230.3m while operating costs were up 7.3 per cent to £142.5m, as it expanded in countries including Saudi Arabia and Hungary and developed its asset management division and digital services.
Some 60 per cent of Knight Frank’s business is in the UK, where Brexit has weighed on the property market, but Alistair Elliott, senior partner and group chairman, said US-China tensions and mass protests in Hong Kong had affected real estate elsewhere.
“As we got closer to the original Brexit date at the end of March, the investment market began to close down, and [UK] markets have been constrained ever since,” he said. “We think capital will come back into the markets [after a Brexit deal]. Investors want it out of the way.”
He added that investors around the world were still pushing into real estate in search of income as interest rates remained low.
“It remains remarkable to me that while activity is constrained in some areas, our trading year to date is similar year-on-year,” he said. “There is enormous scope for growth.”
Knight Frank’s listed rival Savills announced a drop in profits in its half-year results in August, saying pre-tax profits had slipped 7 per cent to £24.7m in the six months to June, compared with a year earlier.
Savills also blamed “challenging transactional market conditions”, citing political uncertainty in the UK and Hong Kong.
Knight Frank, which employs 19,000 people, said on Monday that the Sino-US friction had affected parts of the Asia-Pacific region.
Mr Elliott said the crisis at shared office group WeWork, whose failed IPO has left it facing a possible cash crunch, would have little effect on broader office real estate markets.
“WeWork are having a moment in time, they are struggling with their expansion,” he said. “But they have made it clear that occupiers new and old are interested in a flexible, co-working environment. If they were struggling to be filled it would be more concerning, but these co-working facilities are vibrant places that continue to be very busy.”